After Singles’ Day’s dazzling first decade, what’s next for global shopping fest?

A woman lights a display at an Alibaba Singles’ Day launch event on Oct. 19 in Beijing. (Image credit: TechNode/Cassidy McDonald)

The countdown for Singles’ Day, the world’s largest shopping spree, has begun.

The event, commonly referred to as “Double 11” (双十一) in China, takes place every year on November 11. Last year, “hand-choppers”—online shopaholics who vow to chop off a hand if they continue to buy unnecessary things—spent a record RMB 253.97 billion (around $36.6 billion) across all e-commerce platforms.

This year’s Double 11 will be kicked off with possibly even more vigor as it marks the 10-year anniversary, and represents a last hurrah of sorts for Jack Ma, co-founder of Alibaba and the architect of the shopping extravaganza, who retires next September.

For singletons in China, splurging on material things at Double 11 sale events is an emotional release. But the celebration is not only for lonely hearts and it’s not only for people living in China. It’s become a worldwide phenomenon, celebrated by people that are single, coupled-up or married.

The history of the sales extravaganza has been nothing short of phenomenal. But as competition rises and China’s overall economic environment becomes less favorable, the question for Alibaba and other players is: How to keep the ball rolling?

Getting naked

According to a popular tale circulating online, Singles’ Day, also known as guanggunjie (literally “bare sticks holiday”), originated in 1993. Four Nanjing University students—all single men—decided, during one of their nightly dorm-room discussions, that they should hold an event to celebrate the fact that they had no girlfriends. How, they asked themselves, could they shed their single status, or tuoguang— an expression that also can mean “get naked.”

The Singles’ Day tradition became part of the campus culture in China, but was little-known overseas. That soon would change.

In 2009, Alibaba started marketing the day as a shopping event, offering deals and discounts to cheer up those without a significant other. The shopping custom is a nod to Valentine’s Day—only the gift giver is also the recipient. 

“I never expected that we could actually transform this day into a commercial day, a consumer day for the whole society,” Alibaba Group CEO Daniel Zhang said in a recent interview with CNBC. Zhang, the mastermind behind the shopping fiesta, looks at it as a day all the people that enjoy shopping can participate and all the retailers can showcase their best products. “I think obviously this, today, is more like a phenomenon.”

In the years following its inception, celebration of the “anti-Valentine’s Day” spread and grew in the country. The gross merchandise volume (GMV) generated by Alibaba-owned sites including Tmall and Taobao grew from 2009’s RMB 52 million to 2017’s 1.68 trillion.

Source: askci Corporation (Image Credit: TechNode)

Rapid urbanization coupled with an explosion of middle-class population in China injected new vigor into the e-commerce sector. By 2022, 76% of China’s urban population will be middle class and 54% will be upper-middle class, according to a study by consulting firm McKinsey & Company.

A year-round of online shopping events and sales in the country shows just how eagerly companies want to unlock the market potential.

E-commerce grows up

The Double 11 celebration was largely shaped by tech savvy young adults in their 20s and 30s who have grown to be major online consumers. According to Tmall’s recent report on the past two Singles’ Day events, consumers in their 20s and 30s made up around 70% of total online shoppers.

“Almost all big brands have flagship stores on Taobao and we get cross-store discounts,” Liu Liu, a woman in her late 20s living in Shanghai, told TechNode.

Liu said it’s the time of year for her to stock up daily necessaries like detergent, toilet paper, and cat food, but her friends plan to splurge on new clothes and boots. Scrolling through her WeChat group chat where she and her friends engaged in heated discussions on how to maximize Singles’ Day discounts, Liu said “it’s all they talk about these days.”

(Image Credit: TechNode)

One way to understand China’s rapidly evolving landscape of e-commerce is to look at the turning points that marked significant shifts in the shopping festival’s 10-year history.

In early 2012, China’s e-commerce entered what local industry experts called the “elimination round” (in Chinese) that marked the downfall of a slew of online business-to-consumer platforms who lost competitiveness to bigger players like Alibaba and JD.com, as well as VIP.com, which went public in 2012, and Dangdang Mall, which went public in 2010.

Despite being a turbulent time, more players—retailers, brands, and manufacturers—ventured into e-commerce, established their own online sales channels. Online retail racked up a whopping 1.3 trillion RMB worth of transactions in that year, posting an increase of over 66% compared to the year prior.

“It was in 2012 that e-commerce in China reached a more mature stage,” said Wang Ying, vice president of operations at Syntun, an e-commerce data provider. Wang tells TechNode that other e-commerce heavyweights including JD.com started launching their own version of the Singles’ Day sales.

Alibaba registered at least six trademarks associated with the term “Double 11” as other online retailers began cashing in, which resulted in a trademark spat with JD.com.

The following year, Singles’ Day sales outstripped the biggest shopping days in the US calendar such as Cyber Monday and Black Friday. 

The year 2014 was the year of mobile. Alibaba’s Singles’ Day sales processed by mobile accounted for 42% of GMV, doubled from 2013.

Alibaba faced criticism for being opaque about its Singles’ Day sales figures. In May of 2016, it was reported that the company was under an investigation by the Securities and Exchange Commission (SEC) into its accounting methods for, among other things, operating data from its annual Singles’ Day event. However, the company maintained that all figures required by the SEC were accurately reported.

The 2016 Double 11 celebration was filled with glitz and glamour. It was the first time Alibaba held the Singles’ Day Countdown Gala, which the company broadcast on television and live-streamed on mobile apps. The star-studded event that blurs the line between shopping and entertainment has turned into a tradition.

The first few years of Singles’ Day were mostly online commerce oriented. However, the online to offline business model began to revolutionize the retail industry. In 2016, Jack Ma coined the term “New Retail,” a breakthrough concept that emphasizes the integration of online and offline retail elements.

Wang noted specifically that there was “an emergence of new e-commerce platforms that come from different verticals such as fresh produce sellers.” The fresh food e-commerce industry clicked with the New Retail concept because it caters to higher logistics requirements, including shorter delivery time and cold-chain logistics.

In a bid to gain additional offline and logistics resources, Alibaba purchased a 20% stake in electronics retailer Suning the year before—which paved the way for the two retail giants’ alliance on New Retail initiatives, including rolling out an augmented reality mobile game that aims to drive foot traffic to offline locations.

In 2017, e-commerce players continued to focus on online-offline integration, betting on smart retail solutions to help drive growth. Alibaba turned nearly 100,000 stores across 334 cities in China into “smart stores” and experimented with new technologies including facial recognition-powered payment solutions, smart logistics, and big data analytics.

Last year, Pinduoduo joined the crowded field as a new, but fierce, player. The Chinese social e-commerce platform made a splash that year, and according to Wang, the recently listed Pinduoduo will very likely sustain the momentum this year.

Wang expects the trend to be even more prominent in 2018 as online and offline retail become increasingly integrated. This year, as part of Alibaba’s New Retail initiative, the company’s inventory management platform Ling Shou Tong will help some 200,000 mom-and-pop shops provide online sales promotions and augmented reality red packets that offer discounts at thousands of Tmall Corner Stores.

The festival is an occasion not only for shoppers to squander some cash, but also a perfect opportunity for online retailers to flex new technologies.

As Jack Ma puts it, “This is the day we exchange innovation, invention, and creation.”

Going global

Over the past few years, most overseas sales have come from consumers in North America, but Wang noted that most recently, 11.11 began gaining more traction in Southeast Asia.

“This is largely due to the fact that Chinese e-commerce companies have been eager to make their way into Southeast Asia,” Wang said. Take Alibaba as an example: it has been promoting Alipay in the region, which significantly boosted its usage and penetration. This has contributed to the popularity of Singles’ Day in Southeast Asia. 

Last year’s sale netted Lazada—the e-commerce company that Alibaba owns and operates out of Southeast Asia—$123 million in sales, which was nearly a three-fold increase from the year before. This year Alibaba and Lazada will, for the first time, hold joint Singles’ Day promotions across the region in Singapore, Malaysia, Thailand, Indonesia, the Philippines, and Vietnam. 

A couple pass under a billboard for Alibaba-owned Southeast Asian e-commerce company Lazada in Ho Chi Minh City, Vietnam. (Image credit: TechNode/Cassidy McDonald) 

Minh Hoa Vo, a 30-year-old man who works in retail in Ho Chi Minh City in Vietnam, told TechNode that he was aware of Alibaba’s Singles’ Day event, but wasn’t sure if he planned to buy anything. Vo said online shopping is definitely where the trend is going, but as someone who likes to wander through the mall to blow off steam after work, he said “you must relax by window shopping.”

“Of course, there will be a lot of impulse buying during such events since some products are dirt cheap or very heavily discounted,” Jonathan Tear, an entrepreneur working in Singapore, told TechNode. “I’m certain it more or less is pervasive in the region in the sense that online shoppers are aware due to the heavy marketing on most major online platforms.” However, he noted that other than China’s Singles’ Day, there are other big sales events including 9.9 and 10.10 that “level out the demand.”

Alibaba’s biggest rival JD.com has also set its eyes on the region. “We saw this as a huge market, very very big market, which can accommodate a lot of players so I think for us, right now the concentration is not on an outside competitor but more on how we build up our capabilities in that region,” said Chenkai Ling, VP of Strategy at JD.com, at a roundtable with media in Beijing on November 5. “We are positive on the market potential in Southeast Asia,” he said. 

Clouds gathering

Singles’ Day sales figures have become a key indicator for industry experts to gauge the health of e-commerce companies and the sector. Even though there seems to be an unrelenting vigor around Singles’ Day events every year, it may not always be smooth sailing for Alibaba and other e-commerce companies.

According to a survey by market research firm Nielsen, 79% of consumers said they planned to participate in the shopping festival. However, e-commerce sales this year will be put under a greater microscope due to angst over the outlook of the overall economy of China—which last quarter reportedly had the slowest growth rate since the global financial crisis in 2009. The country is also facing deepening trade tensions with the US.

Source: World Bank/askci Corporation (Image Credit: TechNode)

On their third quarter earnings call, despite reporting better-than-expected results, Alibaba lowered its forecast for 2019, which CEO Daniel Zhang said was due to “fluid macro-economic conditions.” Zhang said with the on-going trade tensions and stock market volatility, the global economy is in a state of uncertainty and the company will hold off on monetizing new revenue streams until economic conditions improve.

Aside from the challenges brought by the state of the economy, the regulatory environment for e-commerce companies in China will also become more stringent. A new e-commerce law, which will take effect in 2019, bans e-commerce operators “excluding or restricting competition” among other measures that aim to “maintain market order.” This means that monopoly-like tactics often deployed by large e-commerce players will be illegal. 

Additional reporting: Cassidy McDonald.